ACI-Operations Certificate Set 4

liquid assets pledged by one or both counterparties to the other to reduce credit risk ✘ deposits placed by a commercial bank with a central bank to fulfill reserve asset ratios ✘ any deposit placed by an institution with another institution of a lower credit rating ✘ any cross border payment of currency ✔

front office and back office should have different management reporting lines ✘ confirmation discrepancies should be investigated within 48 hours ✘ confirmations need only be exchanged via SWIFT if the amount involved is higher than USD1,000,000.00 or equivalent ✘ money market and FX dealers should have different management reporting lines ✔

internal transactions should not be confirmed as there is no credit risk involved ✘ chasers on internal confirmations should be sent less frequently than those for external confirmations ✘ internal confirmations should be subject to the same procedures as those in place for external clients ✘ control procedures should be relaxed generally for internal confirmations ✔

non-cash emerging markets collateral ✘ cash collateral in JPY, your base currency is GBP ✘ cash collateral in USD, your base currency is USD ✘ non-cash high yield collateral ✔

EBA ✘ CLS ✘ TARGET ✘ EAF ✔

interest rate and currency risks ✘ interest rate, stock price and currency risks ✘ stock price and currency risks ✘ stock price risk ✔

the risk that there is no liquid market at the exchange to close a trade ✘ the risk that the present value of a trade will be negative one day prior to value date ✘ the risk that an OTC-derivative product cannot be closed before maturity ✘ the loss incurred if the counterparty defaults ✔

market-price-risk and replacement risk ✘ market-price-risk and delivery risk ✘ replacement risk and delivery risk ✘ replacement risk and basis risk ✔

replacement risk ✘ volatility risk ✘ commercial risk ✘ market risk is reduced to a predefined amount ✔

A collateral agreement eliminates the future replacement risk ✘ A collateral agreement can reduce market risk ✘ A collateral agreement can reduce operational risk ✘ A collateral agreement can reduce the replacement risk ✔